GST is perhaps the most important economic tax reform in recent times. With the Goods and Services Tax bill, the Government aims to create a uniform tax structure across the country. Automobile manufacturers are divided over the implications of GST on car and bike prices. The implementation of GST will affect each segment differently. Most buyers are currently facing a similar dilemma – “Should I buy car after GST?” Many of you might also be wondering – “How will GST Affect Car Price?”. Let’s take a look at how car prices might be affected following the implementation of GST. We will try to answer all these questions in this post here.
Will Cars Cost Less After GST?
Since GST proposes a more unified tax structure, car makers will be able to charge a uniform price across the country. Which means ex-showroom prices of vehicles across India will be the same. However, GST does not subsume taxes such as road tax, which varies across states. This means on-road price across the country will not be the same. Small cars will fall under the 28% GST slab. There will be an additional 1% cess on Petrol and 3% cess on Diesel cars. Which means there will be a slight increase in the prices of small cars (hatchbacks, compact sedans, compact SUVs). The price difference between diesel and petrol variants will also increase. Mid-size cars (length greater than 4 m, engine smaller than 1500cc) such as Maruti Ciaz will cost more or less the same, with only a very small price cut expected for these cars.
However, while luxury cars will also fall under the 28% tax slab, an additional 15% cess will be imposed on them to ensure the Government does not incur major losses in revenue. Despite the additional cess, premium luxury cars will attract less tax, which means they will get cheaper.
The Finance Minister has stated that the maximum tax levied will be 40%. In a bid to push electric vehicles, the Government has ensured they fall under the lowest tax bracket of 12%. However, rather surprisingly, hybrid vehicles have been kept in the highest bracket (28% + 15%). This is a big setback for manufacturers in India who have been planning big investments towards the introduction of energy-efficient hybrid vehicles. Also, under the old tax structure, various states levied additional taxes on vehicles (eg. Octroi in Maharashtra). With the introduction of GST, these taxes will not be applicable, which means the overall percentage change in prices of cars will vary from state to state.
There is some uncertainty surrounding the change in the price of small cars (less than 4 metres, engine capacity less than 1500cc) post-GST. While most reports suggest they will get costlier, Finance Minister Arun Jaitley, in a recent interview, stated the price of small cars will remain more or less the same. The increase/decrease in prices of petrol and diesel cars could vary too. Also, from our calculations, it’s clear that states where Octroi is not applicable could see small cars getting costlier after GST. However, the change in price will be far less significant in states where already people have been paying Octroi.
Medium Size Cars
This particular segment will not see much change in prices. The overall tax incidence on cars such as the Ciaz and City will remain almost the same. However, as is currently the case, the Ciaz diesel thanks to the SHVS mild hybrid tech benefits from a lower VAT rate in Delhi. Under the current GST bill proposed by the Government, hybrids will be taxed the same as normal petrol/diesel cars. Unless there are revisions before GST’s implementation in July, the price of Maruti Ciaz diesel is likely to go up. Also, our calculations show that in places like Delhi, where Octroi is not applicable, cars like the Ciaz could actually cost slightly more. The difference in price will be far less insignificant in states where already people have been paying Octroi.
Luxury cars and medium and full-size SUVs will witness a definite drop in prices. In fact, manufacturers like Mercedes-Benz, Audi, BMW and Jaguar have already started passing benefits of GST on to customers. But this reduction is applicable only on models that are manufactured in India and not on CBUs. SUVs such as the Hyundai Creta and Tata Hexa will see a drop in prices thanks to a lower overall tax of 43% from 44.50% earlier.
Should I Buy a Car After GST?
The implementation of GST will affect each segment differently. Since sub 4 meter vehicles already enjoy excise benefits, implementation of GST will lead to an increase in the price of these models. The effect on the prices of mid-segment cars such as the Ciaz and City will be negligible. However, luxury cars and SUVs will get cheaper, while the biggest beneficiary will be hybrid vehicles. So, yes, you should buy a car after GST in case you were planning to buy a luxury car, SUV or a Hybrid. Most mass market cars, however, will not get really cheaper after the introduction of GST. Also, cost of spares and servicing is set to go up post the introduction of GST.
|Small Cars||28% + 1% or 3% cess|
|Mid-Size cars, Luxury Cars/SUVs||28% + 15% cess|
|Hybrid vehicles||28% + 15%|
Road tax – 3% to 24% (Different for every state)
Since many people have decided to purchase a car after GST implementation happens, various manufacturers have started doling out discounts to attract customers. Here’s a lowdown on what manufacturers are offering to lure buyers.
The entire country is abuzz with news of the upcoming implementation of GST. While GST is sure to affect prices of many goods and services, right from basic necessities like milk to high-end ultra-luxury hotel tariffs, we’ve kept a keen eye on the effects of GST on car prices Quite naturally, many of you have asked us if car prices will reduce after GST. Well, while some cars will indeed get cheaper, prices of many cars will go up after the implementation of GST. Some manufacturers have already started doling out lucrative discounts to counter the low demand in the days leading to the advent of GST. Read on to find out about all cars prices that have reduced after the GST announcement.
Maruti Suzuki, who has been India’s largest selling carmaker since time immemorial, is offering big discounts on most of its vehicles. Maruti dealerships are said to be offering a maximum discount of Rs 35,000 to buyers of the cheapest Maruti car, the Alto. They are also offering discounts upto Rs 25,000 on the Swift hatchback. Quite unsurprisingly, there’s no news of discounts on the all-new Dzire and the Baleno hatchback. The Ciaz gets a price cut of Rs 45,000, while the S-Cross gets a price cut of Rs 45,000.
Hyundai India, which is the second largest selling carmaker in India, is offering discounts of upto Rs 90,000 on the soon-to-be-replaced Hyundai Verna sedan. It’s also offering a huge discount of Rs 2.5 lakh on the Santa Fe. Discounts on the Elite i20 and the Xcent range between Rs 20,000 to Rs 25,000. The Eon hatchback gets a discount of Rs 45,000, while the Grand i10 gets a discount of upto Rs 73,000.
Honda Cars India
Honda Cars India is offering a price cut of Rs 14,500 on the Brio and Rs 50,000 on the Amaze. Even the Jazz has got a price cut of Rs 17,000. The BRV gets a discount of Rs 60,000. There’s no news of any price cut on the City upper-C segment sedan.
“We are giving price protection to the customers for cars retailed from 10 June to 30 June which means that customers will buy the car at pre-GST price now. Post GST implementation whatever the difference in ex-showroom price it will be returned back to the customer by the dealer,” Honda Cars India said.
Popular UV manufacturer Mahindra is also giving good discounts on most of its vehicles. While the fast aging Scorpio gets a discount of Rs 23,000, its big brother, the XUV500, gets a discount of upto Rs 90,000. There’s also a discount of upto Rs 30,000 on the Xylo. While the KUV100 is on sale with a price drop of upto Rs 72,000, there’s a discount of upto Rs 61,000 on the TUV300.
Ford India has come up with discount offers of upto Rs 30,000 on the EcoSport compact SUV. The Figo and the Aspire are available with discounts in the range of INR 10,000 – 25,000. The EcoSport is on sale within a price range of Rs 7.18 Lakh to Rs 10.76 Lakh. While Figo is available for Rs 4.75 Lakh – Rs 7.73 Lakh, the Aspire is on sale within a price range of Rs 5.44 Lakh – Rs 8.28 Lakh.
Speaking on the price reduction after GST announcement, Mr Vinay Raina, Vice President, Sales, Ford India, said,“We are happy to pass on (to customers) the expected benefits of GST ahead of its actual implementation.”
Nissan India is offering a price cut of Rs 80,000 on the Terrano and Rs 25,000 on the Micra small car. Even the Sunny is reportedly available with a discount of Rs 30,000.
Manufacturers like Audi, Mercedes-Benz and BMW have already started passing benefits of GST onto their customers. Mercedes claims an average price drop of 4% on the ex-showroom price of its models. Audi has reduced prices of its cars by upto Rs 10 lakh. BMW is offering benefits of upto 12% on ex-showroom prices of its cars. These benefits include advantages due to GST, a reduced rate of interest of 7.9%, free one year insurance and free service coupons for three years.
Jaguar Land Rover India has also decided to pass on benefits of up to 12% to buyers. Such benefits, which will vary from state to state and will be in the range of Rs. 2 Lakh to Rs. 5.7 Lakh on Jaguar XE and will go up to Rs. 4 to Rs. 10.9 Lakh on Jaguar XJ. On Land Rover models i.e. Discovery Sport and Range Rover Evoque, the benefits will vary from Rs. 3.3 Lakh to Rs. 7.5 Lakh.
Mr. Vikram Pawah, President of BMW Group India said “BMW Group India welcomes the implementation of Goods and Service Tax (GST) in India. We strongly believe that GST will strengthen and foster growth in the country and benefit consumers at large. BMW is the fastest to offer preponed GST benefits to our customers much before the roll-out of GST itself. We are confident that our customers and prospects will enjoy their Sheer Driving Pleasure with value enhanced benefits such as a lower rate of interest, assured buyback and complementary service and insurance in addition to the GST benefits.”
What is the Old Tax Structure?
Right now, there are multiple taxes imposed on a product at the Central and State level. Excise duty is imposed at the factory level based on a classification specified by the Government. Sub 4 meter cars attract the lowest duty of 12%.
For calculating Ex-Factory Price
- Excise Duty – 12% to 27%
|Excise Duty||12%||Small Cars less than 4 Meter in length|
|24%||Cars with Length more than 4 Meter but Engine capacity less than 1.5 Litre|
|27%||Cars with Engine capacity more than 1.5 Litre|
- Infrastructure Tax – 1% to 4%
|Infrastructure Cess||1%||Petrol Cars with engine capacity less than 1.5 Litre|
|4%||High Capacity Cars|
For calculating Ex-showroom Price
- VAT Duty – 12.5% to 14.5%
- Octroi / Entry Tax – 4% to 6% (Applicable in Certain States)
For calculating On Road Price
- Road Tax – 3% to 24%
All this means the on road prices of cars across various states vary greatly depending on the state level tax structure.
Stay tuned to Car Blog India for more updates on how GST affect car price in India. Do you think the introduction of GST will be beneficial to car buyers? Do let us know via the comments section below.
Author- Dhruv Saxena.
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